Market segmentation and wind curtailment: An empirical analysis

Highlights: • We present a empirical analysis for China's high wind curtailment rate. • We quantify interprovincial electricity market barrier using segmentation index. • The interprovincial market segmentation contribute to wind curtailment rate. -- Abstract: China's wind power has experienced explosive growth and reshaped the overall energy mix since 2009. However, increasing investment in the wind power industry has been accompanied by persistent and serious wind curtailment since 2010, leading to significant efficiency loss. This paper argues that the interprovincial market segmentation, which is driven by political motivations, is a key factor contributing to wind curtailment. We first construct an interprovincial electricity market segmentation index. This is then used as an independent variable to explain the variation in wind curtailment rates. A panel dataset of 28 provinces during the 2009–2016 period is used for empirical analysis. The results clearly show that market barriers positively contribute to wind power curtailment. Specifically, a 10% decrease in the market segmentation index will lead to a 4.3–5.3% decrease in wind power curtailment.